In the Commonly asked Questions – TREC Contract Explained Part I, I covered about property type and Earnest money items in the first page of the contract. Let me try to talk about few other important items in the other pages.

What is Title Policy and Who pays for it?

Title policy is an indemnity insurance to cover the buyer against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. It is the only insurance which covers the defects and damages happened in the past not the future. It is usually paid by the Seller but needs to be requested by the buyer’s agent when making an offer in the contract Item 6 shown below:



If you are buying a new home, builders usually pay for it only if you close with their lender otherwise buyers need to pay for it. There is no written rule that seller should always pay for it. You can try to negotiate with the builder to pay it no matter which lender you go with.

Survey
Next comes Survey, another important document which is part of the every contract at least essential when buyer financing the loan. Lenders needs the survey to finance the loan to make sure it’s part of neighborhood and easements are properly marked. Lender request the buyers to provide the survey as part of loan process. Buyer agent should be mark the contract Item 6C (shown below) to either get it from seller or either seller or buyer needs to pay and order through the title company.



If it’s a sale by owner, seller should be able to provide the survey which can be used by the buyer to accommodate the lender request. During the initial negotiation process, agent should be able to check with seller and agree upon accordingly. Otherwise Buyer will be responsible to order through the title company and they will order the surveyor company to do the survey and provide to the lender.

Property Condition
Last thing, I will cover in this post will be the property condition section in the Contract Item 7 shown below:



The Item 7B talks about Seller’s disclosure notice which should be part of any listing other than foreclosures and REO properties. Your agent should be able to provide to you either before or after your property showing. The purpose of the notice is to disclose the condition of the property by the seller to the prospective buyers. Whether there is any damage or any known issues, they should mention it in the notice. It is to inform that buyer should aware of any repairs made earlier and items the house has properly has and don’t have, what’s working and not working. The section Item 7B should be selected properly while making an offer if the notice wasn’t received earlier to make sure buyer receives or they can terminate the contract and get their earnest money refunded. In foreclosure or REO property sales, they are not required to provide Seller’s Disclosure notice.

Item 7C is the section which creates confusion to many buyers. Let me try to explain it. First, if you are buying a foreclosure or REO properties, most banks don’t do repairs so you have no choice than selecting 7D(1). In other cases, you can select 7D(1) to accept the property as is condition and should be able to do an addendum at later point if anything discovered during the inspection period. You only need to select 7D(2) when you already know certain repairs which needs to be fixed even before inspection. In normal situation, agent should select 7D(1) and able to put an addendum later to request seller to repair any issues found during inspection. Don’t worry about that you will be stuck with the property with issues by selecting 7D(1). You still have till option period to get out of the contract and get your refund and no one can force you to purchase it. Hope its clear now.

I was able to cover three important items in the contract in this post, Title policy, Survey and Property Condition which usually triggers lots of question from buyers. Don’t hesitate to ping me or add a comment if you need more clarification. I will continue more about the contract in future posts.

About Vijaianand Thirnageswaram

I am a Proud Realtor of Texas, trying to guide and help clients to find their dream home and educate them to buy them for right price. I am also a Candidate for CFP who has more financial knowledge which allows me share and educate clients in any financial decision making process.

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